Ask RedWeek / August, 2018

I am a Manhattan Club owner and, while I've enjoyed using the club, it's hard to keep up with all the changes and turmoil over the past few years. I read recently that Bluegreen Vacations just announced plans to buy the club. Any idea how that will affect me and other owners?

This is the $64 question that may take three years to fully answer. We stayed at the club recently to meet with owners and lawyers who represent disgruntled owners, and, most importantly, to assess what's happening day-to-day at the Manhattan Club. Here's our report on Bluegreen's announcement and all the related issues that owners are grappling with in the Big Apple.

Bluegreen purchase ushers in new era, MAYBE, for longtime owners

The five-year legal saga at the embattled Manhattan Club entered a new chapter on June 22 when Bluegreen Vacations, a public timeshare company based in Boca Raton, FL., announced that it had finalized "an exclusive agreement" to buy the club's inventory and management contract by 2021.

That's compelling news for all TMC owners who have been caught in a legal limbo, since July 2014, when the New York Attorney General secured a court order to shut down the club's timeshare operation and freeze club assets. The AG's investigation was triggered by complaints from owners who could not secure reservations, claimed they were misled by sales people, and were outraged over the steady spike in maintenance fees, which now approach or exceed $3,000 a year for a single week of usage. Many owners also discovered, to their horror, that they could not sell — or give away — their timeshare intervals.

Background on the NYAG case: the New York Attorney General conducted an undercover sting operation at the club in April and May of 2014 to investigate the club's sales practices. Posing as potential buyers on three separate occasions, AG investigators secretly recorded sales pitches that, months later, became the smoking-gun fulcrum of the AG's case against the Manhattan Club's developer, Ian Bruce Eichner, several relatives and interlocking companies. The AG claimed that the Manhattan Club's sponsors deliberately misled the club's 15,000 or so owners — owners who paid upwards of $400 million, dating back to 1996, to own a small chunk of the Big Apple. Based on the AG's findings, a New York judge shuttered the timeshare operation and froze bank accounts pending a continuing civil and criminal investigation. That mid-summer 2014 court order launched a legal battle between the AG and Eichner, a high-profile Manhattan developer with Trumpian tastes for building big buildings in famous places — Miami, Las Vegas, Manhattan — that consumed three years of legal motions and millions of dollars in legal fees.

On Aug. 16, 2017, both sides called it quits, opting for a complicated settlement instead of more legal maneuvers about legal fees, depositions and related motions. Under a press release headline that said, "A.G. (Eric) Schneiderman Announces $6.5 Million Settlement with Midtown Manhattan Timeshare that Scammed Purchasers," the state declared victory in a case that was never litigated in court. In addition to paying restitution to owners who were unable to use their timeshares between 2010 and 2014, the Eichners agreed to be "barred from the timeshare industry" and promised to sell their stakes in the club to a third-party purchaser, relinquish control of the club and remove all sponsor-appointed officers from the Manhattan Club timeshare association.

"The owners of the Manhattan Club lured thousands of timeshare buyers with false promises and shady sales tactics that violated New York law," said then-AG Schneiderman (who recently resigned amidst a sex scandal).

While rank-and-file TMC owners celebrated the AG's announcement, they and their lawyers soon discovered what they perceived as holes in the settlement. The restitution program was never spelled out in detail and, to our knowledge, no owners have reported receiving a single cent in paybacks for their troubles. The settlement agreement also gave the Eichners three years to sell the club. Because of that compromise decision, the club is still being managed, day to day, by Eichner associates. Eichner still controls the board, too. Many owners who initially applauded the AG's settlement now feel that they were shortchanged. (To see a litany of owner comments, review RedWeek's forum on the Manhattan Club Lawsuit).

Enter Bluegreen: White Knight or Just Another Timeshare Company?

Bluegreen's surprise announcement was a huge morale booster, initially, for TMC owners. Bluegreen Vacations CEO Shawn B. Pearson hailed the purchase agreement as "a milestone moment for Bluegreen. The Manhattan Club has always been a favorite destination for our owners." He also said Bluegreen plans to open at 2,500-square foot sales center (at the club) as part of its ongoing expansion into high-profile vacation destinations.

Pearson said nothing, however, about what Bluegreen plans to do with TMC's existing owners. His office and PR staff also declined to respond to repeated requests from RedWeek for additional information about Bluegreen's takeover of the club. (Industry experts who are familiar with Bluegreen expect the company to roll out a conversion option, at some point, that would enable Manhattan Club owners to join Bluegreen's timeshare club and, perhaps, resolve their existing usage and maintenance fee issues with the Eichner management team).

Here's what we know: According to its annual report, Bluegreen became a public company in November 2017. It runs a point-based timeshare operation for 212,000 owners who have access to 43 Bluegreen resorts and 24 associate resorts. In addition to providing vacations, the company also manages resorts. Bluegreen, which entered the timeshare business in 1994, is 90 percent owned by BBX Corporation, a Florida-based holding company. Bluegreen Vacations has partnerships with Bass Pro Shops and the Choice Hotels chain and reported $668 million in revenue for 2017.

Bluegreen is also no stranger to the 286-unit Manhattan Club. In fact, it's already onsite. According to legal documents filed in the AG's case, Bluegreen signed a sales and marketing agreement with the Manhattan Club in 2010. Since then, it has acquired at least 414 intervals that are reserved for Bluegreen Club members and paid more than $2 million in annual maintenance fees and taxes to TMC. The Manhattan Club is listed as a "club associate resort" on Bluegreen's website. At one point in the AG's lengthy litigation, the AG asserted that TMC's relationship with Bluegreen, and RCI, "limit the amount of inventory available to Manhattan Club owners."

Other legal documents filed in the NYAG's case show that the Eichners owned 2.31 percent of all TMC intervals in 2013, down from 3.37 percent in 2012. These are the units, presumably, that the Eichners must sell pursuant to their settlement agreement with the NYAG.

Lawyers Preparing New Federal Lawsuit against Current TMC Sponsors

While outsiders ponder Bluegreen's future outreach to TMC owners, a new legal team is preparing a federal lawsuit against the Eichners that is designed to provide financial relief to owners who think they are entitled to compensation and/or just want out of their TMC ownership. One way to accomplish both goals, the lawyers said, is to liquidate the Manhattan Club, sell the property, and distribute pro-rata proceeds to owners. While no one has provided an estimate of the building's worth, a nearby hotel property, called The Quin, just sold to the Hilton Grand Vacations timeshare company for $175 million.

Lawyers Jean-Marc Zimmerman and Steven M. Hoffberg are experienced Manhattan litigators who handle complex commercial cases and, on several occasions, have sued very large banks on behalf of their clients. While not ready to expose all details of their legal strategy, they are relying on information and filings from the AG's case, including the settlement agreement, where the Eichners "stipulated" to many findings of fact.

"Our goal is to help people who want to get out from under the burden of their membership and, in a best-case scenario, get their purchase money back," Zimmerman told RedWeek. "It is clear, based upon the AG's findings, that owners were defrauded and deliberately misled about the intervals and rights they purchased in the Manhattan Club. The lack of demonstrable compensation for owners, even in view of the NYAD discontinuance (settlement) agreement, shows the need for new tactics."

The lawyers are already lining up clients and seeking retainers of $1,250 each which, they said, would be refundable from the proceeds of the litigation. To proceed in court, they hope to sign-up several hundred clients so, in their words, "the Eichners can't outspend us."

What's Next?

A key part of the Zimmerman-Hoffberg strategy is attacking the TMC Timeshare Association Board (controlled by the Eichners) for allegedly breaching its fiduciary duties to owners while continuing to pay the onsite management company (New York Urban Ownership Management, also controlled by the Eichners) approximately $6.5 million a year for running the club. That fee, ironically, is the same amount that the Eichners agreed to set aside for restitution to injured owners. The Urban company has had an automatically renewing three-year contract with the board since 2010.

The Manhattan Club HOA board held its annual meeting on August 9. In a packed meeting room, several owners challenged the cost of their maintenance fees while others inquired about the Bluegreen buyout. Bluegreen sent four representatives to the session. They provided a general overview of Bluegreen's point-based travel club, but did not give definitive answers about how they will manage TMC — or deal with the dozens, if not hundreds, of owners who have already signed up on a waiting list to get rid of their timeshares. RedWeek spoke with several owners afterward who expressed confidence about starting a positive relationship with Bluegreen. Others said they look forward to converting their Manhattan Club ownerships into Bluegreen travel club memberships.

RedWeek interviewed two-dozen Manhattan Club owners during a recent stay at the club. Some were happy owners who knew nothing about the AG's case. Others were bitter that the legal saga took so long and (in their eyes) ended up providing so little to owners. A third group was irate about their maintenance fees, which are now higher than a non-owner would have to pay to rent a Manhattan Club suite for a week from an online travel agency (hotels.com, etc.).

One thing they all agreed upon: the once-proud Manhattan Club, despite a loyal staff and great location, is a tired and dated hotel that needs a brand-new start.

About the author

This answer was provided by RedWeek's Chief Correspondent, Jeff Weir. Jeff is a California-based journalist who has covered California, Congress, and the White House. He also has roots in Silicon Valley, where he directed public relations and marketing programs for high-tech companies. He is also a timeshare owner and member of RedWeek.com.

10 Comments

chrisv126

Aug 14, 2018 (9 months ago)
• Updated Aug 14, 2018 07:02 PM

i like spending time at TMC. the personnel who deal directly with owners, e.g., bell people, front desk, concierge, et al, are all very pleasant and accommodating. i am not currently seeking to get rid of my time at TMC as long as i get assurances that i will get what i paid for when i purchased TMC. one of the most important items was that, paraphrasing.....almost quoting, the salesperson, "your maintenance fees will rise very slightly"* over time. I DO NOT CONSIDER A RAISE OF 400% FROM THE TIME OF PURCHASE UNTIL NOW, VERY SLIGHTLY*. the maintenance fee has become a financial burden as it rose exorbitantly and exponentially since my initial purchase. i am looking forward to bluegreen to respect current TMC owners and, among other things, to substantially reduce the maintenance fees to a more financially manageable amount as promised in the original sales presentation.

chrisv126

Aug 14, 2018 (9 months ago)

i hope this article by jeff weir will appear in the usual redweek.com forum: the manhattan club lawsuit.

fibon

Aug 16, 2018 (9 months ago)

Dear Jeff, thank you so much for your attention to the TMC matter.

Could you please kindly provide a reference to the legal document filed in the AG case that Bluegreen signed a sales agreement with the MC in 2010 and has acquired 414 MC intervals for the BG members.

I would like to find out which intervals have been sold. I do not see any provisions in the TMC By-Laws, OP's, Purchase Agreements and the AG settlement that owners undersigned their Deeded interests to be sold or transfered to BG. In case the owner is not interested in sale or transition but his/her interest has been sold to BG without owner's acknowledgement might raise a breach of contract issue.

jeff_reports

Sep 05, 2018 (8 months ago)
• Updated Sep 05, 2018 02:34 PM

please see the Manhattan Club Lawsuit forum on redweek.com for a new update on the AUGUST 29 court hearing. It includes a letter from the plaintiff's attorney, Jean Marc Zimmerman, about the litigation against the current TMC board.

richarda705

Dec 12, 2018 (5 months ago)

The AG settlement is totally unsatisfactory even if implemented. Do you have contact info for Zimmerman-Hoffberg attorneys? There must be some recourse for owners who have been totally cheated out of their purchase price and ever escalating maintenance fees when one can merely go online and rent one of “our” units without any continuing obligation to TMC.

chrisv126

Dec 13, 2018 (5 months ago)

december 12 has come and gone. what are the results of this all-important court date for mr tucker.? why hasn't ANY information been published here on redweek.com? is it an oversight? was the court date changed? was the court proceeding halted/postponed? we need to know, NOW, the entire disposition and conclusion of this court proceeding.

Last edit by chrisv126 on Dec 13, 2018 04:02 PM.

dennisc283

Dec 14, 2018 (5 months ago)

chrisv126 wrote:

december 12 has come and gone. what are the results of this all-important court date for mr tucker.? why hasn't ANY information been published here on redweek.com? is it an oversight? was the court date changed? was the court proceeding halted/postponed? we need to know, NOW, the entire disposition and conclusion of this court proceeding.

Last edit by chrisv126 on Dec 13, 2018 04:02 PM.

Chris: Tone matters. Red week has no RESPONSIBILITY to report anything. Jeff Weir has been doing a great job for years, hopefully he’ll continue to volunteer his time & efforts. Perhaps the hearing didn’t happen. Perhaps Redweek decided not to spend money on this hearing. Lets have a little patience with our friends at Redweek, or anyone else who may have spent the time & money to find out, document and report.

chrisv126

Dec 14, 2018 (5 months ago)

dennis and sue,

in no way did i fault redweek nor jeff weir. that didn't happen either by tone or written composition. redweek.com has the responsibility to submit appropriate messages that subscribers post, just as they posted mine. that's one of the benefits we all pay for to become contributors to TMC forum. jeff weir does a fine job of reporting: he does not volunteer his time. he's a reporter for redweek.com, and a good one. we had all been awaiting the results of the dec 12 court hearing. those who requested the hearing should have reported it more quickly than 2 days after said meeting took place. it would have been posted on redweek.com upon submission by the responsible party. i think we have been patient for over three years. there comes a time when patience is rather worn and somewhat tattered. being anxious for available information has nothing to do with patience in the first place. this is a need-to-know-quickly piece of information. owners on this redweek.com depend on this type of information to help them make future decisions regarding the patent TMC fraud and financial distress that they have had to bear. perhaps the patience you describe should be practiced by those who need it most

dennisc283 wrote:

chrisv126 wrote:

december 12 has come and gone. what are the results of this all-important court date for mr tucker.? why hasn't ANY information been published here on redweek.com? is it an oversight? was the court date changed? was the court proceeding halted/postponed? we need to know, NOW, the entire disposition and conclusion of this court proceeding.

Last edit by chrisv126 on Dec 13, 2018 04:02 PM.

Chris: Tone matters. Red week has no RESPONSIBILITY to report anything. Jeff Weir has been doing a great job for years, hopefully he’ll continue to volunteer his time & efforts. Perhaps the hearing didn’t happen. Perhaps Redweek decided not to spend money on this hearing. Lets have a little patience with our friends at Redweek, or anyone else who may have spent the time & money to find out, document and report.

dennisd273

Dec 16, 2018 (5 months ago)

Exactly. The pirates who formerly owned Manhattan Club were taking large chunks of the annual fee for themselves. The reason we can't sell our shares is that exorbitant annual fee. Bluegreen will not be able to sell them either with the fees that high. They would need a reduction of about 50% to start to move things along. I don't think they will want to do that, since they have shown some greediness so far such as selling cheaper liquor (Smirnoffs) at the bar while keeping the same high prices. I like going there to and like the people that work there. We have known some for 18 years now. I hate the feeling of being fleeced by management.

dennisc283

Dec 16, 2018 (5 months ago)

chrisv126 wrote:

dennis and sue,

in no way did i fault redweek nor jeff weir. that didn't happen either by tone or written composition. redweek.com has the responsibility to submit appropriate messages that subscribers post, just as they posted mine. that's one of the benefits we all pay for to become contributors to TMC forum. jeff weir does a fine job of reporting: he does not volunteer his time. he's a reporter for redweek.com, and a good one. we had all been awaiting the results of the dec 12 court hearing. those who requested the hearing should have reported it more quickly than 2 days after said meeting took place. it would have been posted on redweek.com upon submission by the responsible party. i think we have been patient for over three years. there comes a time when patience is rather worn and somewhat tattered. being anxious for available information has nothing to do with patience in the first place. this is a need-to-know-quickly piece of information. owners on this redweek.com depend on this type of information to help them make future decisions regarding the patent TMC fraud and financial distress that they have had to bear. perhaps the patience you describe should be practiced by those who need it most

dennisc283 wrote:

chrisv126 wrote:

december 12 has come and gone. what are the results of this all-important court date for mr tucker.? why hasn't ANY information been published here on redweek.com? is it an oversight? was the court date changed? was the court proceeding halted/postponed? we need to know, NOW, the entire disposition and conclusion of this court proceeding.

Last edit by chrisv126 on Dec 13, 2018 04:02 PM.

Chris: Tone matters. Red week has no RESPONSIBILITY to report anything. Jeff Weir has been doing a great job for years, hopefully he’ll continue to volunteer his time & efforts. Perhaps the hearing didn’t happen. Perhaps Redweek decided not to spend money on this hearing. Lets have a little patience with our friends at Redweek, or anyone else who may have spent the time & money to find out, document and report.

Chris V; I hope you are sending thanks to Zimmerman and his clients for funding his efforts, and allowing him to disclose to non-client owners, the results of their case and strategy.

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